But now a leaked government report suggests the mayor and his finance minister, Alibor Choudhury, have links to Islamic extremist groups, including one seeking to set up a Sharia state in Europe.

Lutfur Rahman, the mayor of Tower Hamlets, is being investigated over allegations of fraud and has now been linked to extremist groups, as has Alibor Choudhury, his finance minister

A document handed to The Sunday Telegraph says that three community centres owned by the council, or by their housing authority, were used for meetings of radical groups including al-Muhajiroun, the banned Islamist terrorist organisation founded by Omar Bakri Mohammed and Anjem Choudary

A third was used by political hate groupHizb ut-Tahrir and 'may still be' in use, according to the report which was prepared for David Cameron in 2013.

Another cause for concern is the council's £2million of funding given partially to the East London Mosque, which previously held a telephone Q&A with al-Qaeda leader Anwar al-Awlaki.

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They have links to the Islamic Forum of Europe which is seeking to set up a Sharia state within Europe. The council's new finance minister, Alibor Choudhury, has close connections to the organisation as do other senior council officers.

Earlier this week police and investigators were called to the council to assess whether Mr Rahman had deliberately doubled funding to Bengali-run charities in the hope of buying favour.

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Mr Rahman was also accused by Panorama of increasing public funding to Bangladeshi and Somali groups from £1.5 million to £3.6 million in the face of officer recommendations.

The mayor has denied all the claims, which he claims are motivated by racism and Islamophobia.

Communities Secretary Eric Pickles has sent inspectors into the council to work alongside police

Speaking to Mail Online, a DCLG spokesman said: 'It is a matter of public record that Ministers have long been concerned about a worrying pattern of divisive community politics and alleged mismanagement of public money by the mayoral administration in Tower Hamlets.

'Separately, Ministers are also minded to use their new powers under the Local Audit and Accountability Act 2014 to take action against councils continuing inappropriate spending of taxpayers’ money, and Brandon Lewis has written to Tower Hamlets about this.'

The spokesman added that, as the report was leaked, the department would not be commenting on allegations of extremism.

A spokesman for Tower Hamlets council said: 'Tower Hamlets has a strong record in partnership working with many different agencies in tackling and preventing extremism from Office of Security and Counter Terrorism (OSCT) funded projects to our Prevent programmes, receiving Home Office sign off to working with Stonewall on faith and sexuality.

'Our approach to diversity, equality and social cohesion has been recognised by our peers and is reflected in the ‘Excellent’ rating received from the Local Government Association.'

An earlier version of this article referred to the Osmani Trust as a Muslim-only youth group. We have been asked to make clear that the Osmani Trust is not faith based.